The UAE’s efforts to enhance its competitiveness and attract foreign direct investments (FDI) have yielded remarkable results. Notable reforms, such as visa changes and groundbreaking deregulations allowing 100% foreign ownership of businesses, have positioned the UAE as an attractive destination for investment. Even in the face of a global pandemic that led to a sharp decline in investments worldwide, FDIs into the UAE surged to $19.88 billion in 2020, marking a substantial 44.2% increase from the previous year.
In recent years, global financial markets have been impacted by factors like population growth, globalization, climate change, and systemic challenges. These effects have gained prominence, particularly in the wake of the pandemic, prompting individual investors to take note of long-term trends and macro-level themes. The UAE, known for its forward-thinking approach, has demonstrated a keen awareness of these trends, as evidenced by the findings of a recent survey.
The Continental Group, a leading insurance intermediary and financial services solutions provider in the Gulf Cooperation Council (GCC) region, conducted a survey on investment trends during a webinar. A significant 71% of respondents believe that technology trends such as Artificial Intelligence (AI) and Robotics will dominate capital markets in the near future. This shift in investor sentiment emphasizes the importance of keeping pace with evolving customer preferences and macro-level trends.
Karen Kharmandarian, a Senior Portfolio Manager at Thematics Asset Management and a key speaker at the webinar, shed light on this evolving landscape. “As we gear up for the post-pandemic revival, the prevailing investor sentiment provided the perfect backdrop for the Continental Group to host a webinar on thematic investment strategies, and bring diverse ideas to the table. Such endeavors will help all our stakeholders effectively navigate new challenges and extract maximum value from newly emerging digital investment classes,” he remarked.
Thematic investing strategies, by design, aim to capture opportunities arising from long-term structural trends, irrespective of short-term market fluctuations. Achieving value and returns in this strategy hinges on investors’ comprehension of the underlying drivers of these long-term trends or “themes.” Experts at the webinar unanimously concurred that thematic investing can generate significant value at scale. However, investors who are slow to recognize these thematic drivers may miss out on maximizing their long-term returns.
Thematic investing aligns well with the current investment landscape, offering diversified approaches within specific risk categories to bolster portfolio resilience. Traditional investments in bonds and equities may not provide all the answers to the complexities of modern capital markets for both retail and institutional investors. This strategic shift from conventional models to future-ready ones is becoming increasingly evident in the UAE.
Notably, a significant portion of FDIs in the UAE were channeled into the information technology sector, encompassing AI, VR/AR, IoT, and robotics. Renewable energy and electric vehicles (EVs) also saw substantial FDI growth, reflecting a visible shift in investor sentiment towards “thematic” investment opportunities. Investors are not only identifying these themes but are also exploring investment prospects along the thematic value chain, as highlighted by Neelam Verma, Vice President and Head of Investments at The Continental Group.
Neelam stated, “Our focus at The Continental Group has always been to provide well-researched thematic investment options within the equity and fixed income sectors, aligning with our clients’ risk tolerance to enhance their wealth. Our recent webinar, ‘What Themes will Define the Decade: Harness the potential of thematic investment strategies for structural growth,’ underscores our commitment to helping investors achieve their financial goals with the guidance of our experienced team of advisors. As we transition to the new normal, our clients can anticipate innovative thematic solutions and offerings to diversify their portfolios.”
Globally, the number of connected devices has witnessed rapid growth, reaching 27 billion in 2021, up from 17.1 billion in 2016. The accelerated digitization during the pandemic has further amplified this trend, signifying a vast potential for increased adoption of AI and automation across various industries. Unsurprisingly, the majority of respondents in the Continental Group’s survey expressed technology as their primary focus, underlining the increasing importance of staying aligned with the technology-driven future.